Investment Advice: Purchase Raubex, Dispose of Sasol
News Article: Raubex and Sasol Investment Outlook in South Africa
The investment landscape in South Africa is showing some promising signs for infrastructure development and construction materials specialist, Raubex Group Limited. With a solid dividend yield of around 4.28% to 4.48%, the company has demonstrated a consistent growth trend over the past decade, suggesting stable income potential for investors[1][4].
Raubex's international expansion, particularly in Australia, is being driven by infrastructure projects and increased government spending, especially in the renewable energy sector within South Africa[1][2]. However, a recent insider selling spree, notably by a key non-executive chairman reducing holdings by 17%, may raise concerns about insider confidence at current prices, despite the sales occurring at prices above today’s share price[5]. Technical analysis reflects moderate volatility and mixed signals with potential downside risks from macroeconomic pressures impacting the engineering sector[4].
The financial results of Raubex were delayed due to investigations into a whistleblower’s report about two months ago[6]. Despite this setback, the company's strong balance sheet and a record order book continue to support its growth potential. Notably, the recovery in chrome prices has benefited Raubex's Bauba mining operations[7]. Management's cost-saving interventions at Bauba have also improved the outlook for the company[8].
On the other hand, the current investment outlook for Sasol, a major integrated energy and chemical company in South Africa, is less clear. Sasol's earnings are exposed to multiple currencies and commodity prices, making it vulnerable to global market fluctuations[3]. The company has consistently struggled to align earnings per share with free cash flow per share, and its cash return metrics are mediocre[3]. Sasol's questionable capital allocation track record and challenges on the ESG front, due to its carbon-intensive business, are additional concerns[9].
Recently, Sasol's share price has decreased by two thirds from about R340 at the end of July 2022[9]. Several management changes have also occurred at the company, casting doubt on its investment case[9]. However, the market was assured that nothing was amiss following a brief tumble in Raubex's share price[10].
In conclusion, the current outlook for Raubex is cautiously positive but with some risk factors to monitor, such as insider selling and macroeconomic headwinds. The company's strong balance sheet, international expansion, and focus on renewable energy projects provide growth potential. For Sasol, further updated data and financial reports are required to assess its current investment outlook and financial performance.
Sources:
- BusinessTech
- Engineering News
- Business Day
- Investor24
- Fin24
- Moneyweb
- Mining Weekly
- Engineering News
- Business Day
- Fin24
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